In Uncategorized on 04/10/2019 at 16:52

If the person, not an actuary, who sets the premiums for your captive insurance company states on the stand at trial that this was how said premiums were computed, you may be sure that Judge Ruwe maybe so might could just find that your insurance company wasn’t an insurance company at all, but a roundy-round cash circle to set up phony deductions.

And he did, in Syzygy Insurance Co., Inc., et al., 2019 T. C. Memo. 34, filed 4/10/19.

Here’s a sample.

“Mr. T is not an actuary.  We recognize that premiums can be set by nonactuaries, but Mr. T’s underwriting report has no calculations showing how he arrived at the premium prices.  Mr. T does not appear to have used any type of actuarial rating model or compared premium prices with similar publicly available policies.  As stated by Mr. Taylor, he was using a ‘will ass guess’ at one point during the pricing process.” 2019 T.C. Memo. 34, at p. 35.

Of course, the head honcho of the nominal insured never bothered to file some claims. And finally quit the scheme because the premiums were too low.

Now it beggars belief that any insured would object to premiums too low, only too high.

Judge Ruwe marches through some old friends, like Avrahami (see my blogpost “The Selfies – Eclipsed,” 8/21/17), Rent-A-Center (see my blogpost “Insurance – Are You Sure?” 1/14/14), and Securitas (see my blogpost “Third Time Lucky,” 10/29/14).

Syzygy fails every test. Undercapitalized (assets included life insurance policies it couldn’t touch); any real risk reinsured; rate-on-line (ratio of premium to occurrence limit) six times normal, so big premiums for low cover; State (DE) regulators concerned with solvency of Syzygy, not with whether premiums were too high; and the only paid claim was one that could have been successfully fought (but editorial query; it was $20K, so was that worth fighting?).

But Syzygy’s principals relied upon their trusty and well-qualified CPA, so no chops.

“Will ass guess”? Don’t you mean “wild ass guess”?


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